Maravi

Rupiah and son James in trouble over oil

Rupiah and son James in trouble over oil
By Kombe Chimpinde
Wed 18 Apr. 2012, 13:30 CAT

THE Wynter Kabimba-led Commission of Inquiry into the Energy Regulation Board has recommended that Rupiah Banda, his son James and some former senior government officials be investigated over the K2 trillion oil procurement loss.

According to the report presented to President Michael Sata last week by the commission tasked to probe the procurement of oil and matters related to it, the commission stated in its executive summary that the government had lost about K2 trillion from contracts awarded during the period 2007 to 2011 through malpractices and corruption.

Sources revealed that the Commission had recommended that law enforcement agencies investigate Banda, his son James and other named public officers at the then ministry of energy and water development and Zambia Public Procurement Agency in relation to various listed procurements contracts, irregularities and malpractices as well as acts of corruption.

The source said the Commission further recommended in its report, yet to be tabled before Cabinet, that officers mentioned in the report who were still serving in government and all contracts with irregularities that are still running be suspended pending investigations.

Others named in the report are former minister of energy and water development Kenneth Konga, former permanent secretaries in the same ministry, Peter Mumba,Teddy Kasonso, Buleti Nsemukila, former minister of information and broadcasting Lt Gen Ronnie Shikapwasha.

ZPPA former director Samuel Chibuye and David Kapitolo secretary in the Central Tendering Committee (CTC) , ZPPA Justin Matimuna and director in the ministry of energy Oscar Kalumiana, a Mr. Buttler Sitali an executive director of ERB, TPPL general manager Patrick Musenyesa, Largeman Muzelenga managing director of TPL have also been recommended to be investigated.

The report wants action to be taken against the named officials.

"The report has further recommended that all officers who are serving in government and all contracts with irregularities that are still running be suspended to pave way for investigations," he said.

The Commission's key findingss were that the procurement methods and tender procedures for supply of oil as outlined by the Public Procurement Act No. 12 of 2008 as read together with Finance Act of 2004, were consistently breached by the ministry of energy and ZPPA through the named individuals.

The source said the report had established that the process of selecting suppliers for petroleum feedstock and finished products had been clearly characterised by malpractices and corruption, with an example of an initial contract awarded to Dalbit, a Kenyan petroleum Company at $2.1 million for petroleum infrastructure improvement through direct bidding that was dubiously increased to $65 million through continued extensions of the same contract to its sister company Dalbit International unlawfully, thereby government losing US$ 13.5 million.

"This is in a contract TB/SP/020/09 which was for bidding for the supply and delivery of 90 million liters of diesel and 30 million liters of petrol dated 26 January 2010. Here the Commission established that the direct bidding was done without lawful justification as stipulated by the PPA," the source said.

The source also disclosed that the ministry of energy contracted Dalbit International to undertake various works on petroleum related infrastructure to the extent of $65 million when the prevailing market rates and standards that government could have expected to pay only $ 49.3 million, this resulting in an over payment of by government to Dalbit International of US$ 15.6 million.

The source also revealed the ministry failed to appoint an independent project manager to supervise the petroleum infrastructure projects in which government lost huge sums of money through non-adherence to construction norms.

The source said Dalbit Petroleum which came out prominently in the commission's findings was also fraudulently awarded a contract to rehabilitate fuel tanks at Ndola Fuel Terminal under the pretext of project financing when in fact it was secured through the Strategic Reserve Fund.

"Dalbit was also awarded a contract approved by Mumba and Kalumiana, to supply an annual value of 84 000 cubic meters of diesel on a two year running contract signed on 17 April 2009 under tender number TB/ORD/058/08 despite being more expensive than ORYX/ADDAX, which was the initial lowest bidder.
The same contract volume increased to 155 000 cubic metres without lawful justification," the source said.

"On the same contract number, Dalbit was overpaid an amount of $101.4 million for the supply and delivery of finished products arising from payments made through letters of credit issued by the ministry of finance under the instructions of ministry of energy for the period May 2010 to December 2011."

The source said the report established that flimsy reasons of security concerns against ORYX/ADDAX were given without any documentary evidence.

"The report states that there was also introduction of new evaluation criteria by splitting the quantities to supply to favour Dalbit Petroleum despite the company's lack of a proven record," the source said.

The source said that in another contract to supply 10 million and 15 million liters of following the closure of Indeni filed TB/ORD/058/08144 and dated September 2009, influenced by Banda and his son James, government lost US$ 13.5 million on low sulphur diesel alone as a result of Dalbit Petroleum using incorrect conversion factors when calculating the price.

The source said that the Commission in its report stated that in a contract without a number , Dalbit Petroleum was awarded a proposed contract to refurbish fuel tanks at Ndola Fuel Terminal in March 2010 worth US$ 2.8 million through direct bidding without following tender procedures.

The source further revealed that the report established that government fraudulently awarded Glencore contract of supply and delivery of 1444 000 metric tonnes worth $ 91.1 million of commingled petroleum N0 TB/ORD/022/09, in which Banda, Konga, Lt Gen Shikapwasha and other government officials have been implicated, which was more expensive than the lowest preferred bidder Oryx/ADDAX.

In the same contract, overpayment of $ 119.3 million was done to Glencore through letters of credit instructed by the ministry of finance.

The source said: "Government was also committed to borrowing for an unclearly outlined tender of an aggregated value of $ 65.6 million when the funds were available under the Strategic Reserve Fund(SRF), obtaining financing charges at 8 per cent when the same contract was provided for under SRF."

The source revealed that in a fraudulent contract No TB/11/4/1-149 of supply and delivery of 150 000 MT influenced by Konga, Gallic, a company with no proven record and which failed to complete the tender, was overpaid $ 15.3 million by government due to over pricing by the company, through government's failure to do its ground work on the same.

The contract was later assigned to LITASCO.

"The report reveals that there was interference with the tender procedures by allowing a bidder (LITASCO) to alter the bidding document in their favour, availing a tender document to a prospective bidder without authority, sending officials from PTA Bank, TPL, INDENI and ministry of energy and water development to Kuwait to facilitate the awarding of the contract to IPG," the source said.

The source revealed that a further fraudulent award was given to ORYX/ADDAX Energy South Africa for the supply of 90 000 metric tonnes at the cost of US$ 70 million dated 13 May 2011 amidst failure by relevant authorities without ZPPA's input.

But an energy expert yesterday said the K2 trillion which the Commission reported as having been embezzled was a deficit that government had incurred in the financing of fuel imports as a result of its decision not to increase pump prices since 2007.

Opting to remain anonymous, the source said when Total pulled out of the Indeni Refinery in 2007, government started importing feedstock for the refinery.

"The first cargo imported by government in 2007 was Mt Tom Sara. Due to the non revision of the prices to recover the full cost of the cargo, government recorded a deficit of US$ 6.1 million on that cargo," she said.

"Between 2007 and 2011, government imported 27 cargo. In 2012, government has imported 2 cargo. Government recorded deficits on all cargo imported between 2007 and 2011 with the exception of three cargo namely Mt Monterey, Mt Valaian T and Mt Jagleela. The deficits arose because of government's decision to cushion the consumer against high pump prices. To this end, government did not increase the prices to sufficient levels to recover the cost of the concerned cargo. In some cases, government decided not to increase the prices at all despite the rising global prices."

She said government incurred US$18.6 million, in 2007, US$ 90.6 million in 2008, US$ 44.6 million in 2009, US$ 64.7 million in 2010 and US$ 152.9 million in 2011 as deficits, equivalent to K2 trillion at K5,200 per dollar.

"It is the above K2 trillion which the Wynter Kabimba Commission has seriously misrepresented as having been embezzled. The correct position is that this money represents the deficit or subsidy which government has incurred on fuel since 2007. This has been to cushion the consumer against high pump prices. It is the consumer who benefitted," she said.

"This practice has continued even under the PF government as the full cost of the cargo are not being fully recovered. The two cargo which have been imported during the PF government are Mt Sea Voyager and Mt Blue Sea. These two cargo are also projected to record a deficit of US$63.2 million. These figures can be verified with Tazama Pipelines Ltd. It is not possible that this amount can be embezzled in such a small economy."

The source said the Commission lacked objectivity because of its composition.

"Given his (Kabimba) position as the chief executive officer of the PF, it would have been very naive for Zambians to expect Mr Kabimba to come up with a report which would not contradict the expectations of President Sata and the PF government," he said.

Labels: CORRUPTION, MICHAEL SATA, OIL, RUPIAH BANDA

posted by MrK @ 4:49 PM